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The Education of E-Textbook Startup Kno

E-textbook publisher Kno wants to diversify beyond iPad app sales

The office walls of Kno, a Santa Clara (Calif.) startup that wants to bring the e-book revolution to college textbooks, are filled with signs containing playful puns on its name: “Kno it All,” “Good to Kno.” Lately though, the mood around the company hasn’t been particularly lighthearted. Kno raised $80 million in venture capital in 2009 and 2010, but tried to do one of the hardest things in Silicon Valley: create consumer hardware from scratch. In April, as Apple’s iPad continued to dominate the tablet market, Kno decided to shelve plans to sell its own tablet specifically geared to the education market. It subsequently laid off a third of its employees.

Kno decided that if you can’t beat ’em, join ’em. It revamped as a software company and in June released an app for, yes, the iPad. The app lets students buy and read digital textbooks, and Kno now offers about 100,000 of them. However, due to new rules out of Cupertino, Calif., 30 percent of the revenue from books Kno sells through its iPad app must be passed along to Apple headquarters. That’s tough to swallow for both Kno and its textbook publisher partners, who are used to paying a 10 percent to 15 percent cut to brick-and-mortar retailers.